Symposium | Rebuilding Enforcement

Higher Ed: Protect Students from Predatory Colleges

By Aaron Ament Dan Zibel

Tagged Department of EducationHigher educationInequalityTrump Administration

Higher education remains one of the most powerful drivers of economic mobility in America. But price and quality vary widely, costs are growing fast, and higher education suffers from and perpetuates the same structural racism and inequality that afflicts all of America’s institutions. For far too many students, enrolling in and borrowing for college has become a trap that reinforces barriers to opportunity instead of removing them. Black students incur higher debt than their white peers and are more than twice as likely to default on those loans, in part because they are underrepresented at the institutions that most reliably graduate students with meaningful degrees. The next President will have to address these challenges and therefore needs to be armed with concrete, day-one actions to ensure the Department of Education is part of the solution and not part of the problem.

One key driver of these disparities in higher education is predatory or poor-quality for-profit colleges. These institutions disproportionately recruit students of color, students who are struggling financially, veterans, and others to whom our education system has already failed to provide equal opportunity.

Higher education has also become big business, with the federal government doling out billions of dollars of taxpayer-funded loans and grants to publicly traded or private equity-backed, for-profit schools each year. Many of these companies have tapped into federal student aid programs to boost their own bottom lines at the expense of students’ success. Driven by earnings pressures, executives too often cut spending on instruction and instead funnel money into online advertising that targets students of color, veterans, single mothers, and low-income populations. Students who enroll are often left with worthless degrees and crushing debt that they stand little chance of repaying.

Yet instead of defending protections for such students and borrowers, the Trump Administration has sought to undermine them at every turn. The press has thoroughly documented Education Secretary Betsy DeVos’s efforts: repealing the “Gainful Employment” rule protecting students at for-profit and career college programs; rolling back the ban on colleges using class-action waivers and mandatory arbitration clauses along with student protections in the “borrower defense” regulations; refusing to provide loan relief to defrauded borrowers; delaying protections for students enrolled in online education programs; sidestepping mandatory loan discharges for students whose institutions shut down; and illegally propping up for-profit colleges with federal funds even after they lose their accreditation. Simultaneously, Secretary DeVos has attempted, albeit unsuccessfully, to slam the courthouse doors shut on borrowers who have been victimized by shoddy loan servicing practices. Our organization has been on the front lines, successfully pushing back against many of these actions in court.

The Trump Administration’s attempts to roll back regulations and safeguards for students and student loan borrowers are important, but they’re only a part of the story. The Administration has also defanged the Education Department’s enforcement of the laws and regulations that remain on the books. Solutions to the bigger-picture problem aren’t easy, but there is one straightforward path toward tackling this crisis: The federal government—with the Department of Education in the lead—has the authority, the resources, and the moral obligation today to hold higher education institutions accountable by deploying an enforcement regime that prioritizes students.

This idea isn’t new. A bipartisan Senate Subcommittee on Investigations came to a strikingly similar conclusion in a 1991 report, recommending that the department should “act swiftly and decisively” when it finds violations. The report also recommended that the department’s program staff “must assume a far greater and more proactive role in detecting and dealing with” violations identified in program reviews of schools.

More recently, after a period of deregulation in the early 2000s, the Obama Administration recognized the dangers posed by the for-profit education industry, and implemented regulations, including the Gainful Employment Rule, against the industry’s protests. The Administration also recognized that regulations only work when they are enforced, and dusted off authorities to take bold enforcement actions against institutions that defrauded or failed students. The collapse of high-profile companies like Corinthian Colleges and ITT Educational Services became cautionary tales for unscrupulous schools.

As part of this effort, the department launched a new, dedicated enforcement unit in early 2016. That unit was led by experienced civil prosecutors and enforcement litigators with a mandate to tackle the predatory college crisis. It centralized several existing offices within the department and created new offices dedicated to both investigating misconduct and providing relief to borrowers.

The presence of a strong new enforcement team led many institutions to change their practices, but the Trump Administration quickly dismantled these efforts. Secretary DeVos stacked her team with industry veterans, including some with ties to companies with a history of legal problems. DeVos’s toxic cocktail of personnel and policy positioned for-profit college chains for a resurgence. And now, with a recession that has put tens of millions of Americans out of work and has wreaked havoc on the American economy, and a pandemic that largely forces them to online education, for-profit colleges are seeing opportunities.

A for-profit education resurgence is likely to have a lopsided impact on students of color. The limited data on race and ethnicity that the government collects establishes that Black student borrowers see significantly worse outcomes on their loans compared to other borrowers—disparities that appear to be largely driven by attendance at predatory, for-profit schools. Now more than ever, as our nation rebuilds after the COVID-19 pandemic, the federal government must redouble its efforts to protect students from the actions of predatory schools. The virus itself has already disproportionately impacted Black and Brown communities; we cannot afford to leave any students or borrowers unprotected.

The good news is that—as Student Defense outlines in a new report—the next administration can start that effort on day one by strengthening accountability for schools, loan servicers, accreditors, and anyone else who receives federal education funds. Perhaps the easiest step a new administration can take is symbolic, reversing the Trump Administration’s decision to rename the department’s Federal Student Aid enforcement office to the “Partner Enforcement” office, undermining the office’s emphasis on accountability. The department must embrace the fact that colleges and universities are not partners; they are regulated entities that act as fiduciaries of more than $120 billion in taxpayer funds each year. Just as the Enforcement Division of the Securities and Exchange Commission has a clear mission (to protect investors), the Department of Education’s enforcement unit must act with a singular mission: to protect students.

But symbolism is not sufficient. The next administration must take concrete actions that establish that it will put students and borrowers first. The department must rebuild the enforcement office, including most importantly, the investigatory team that has been eviscerated by the Trump Administration. And that office must be led by an individual with substantial litigation law enforcement experience, building on the precedent set by the Obama Administration’s hiring of Rob Kaye, who had decades of experience as a trial lawyer, including leadership roles handling consumer protection matters at the Federal Trade Commission.

Enforcement cannot be left to one office. Student protections must be considered in each and every decision the department makes. Embedding a consumer protection official—supervised by the enforcement office—into each of its regional compliance offices would ensure the department does not put institutional interests above student interests. By taking this step, the department can ensure that it is putting a consumer protection lens onto every decision it makes regarding a college or university’s participation in the student loan programs. When deciding whether to renew a school’s participation in the federal student loan programs, the department must ask: Is this good for students?

With the benefit of structural improvements, the department can then take a series of steps that do not require difficult or lengthy rulemaking or legislation, but that together would fundamentally transform enforcement. This could bring disruptive and lasting change to the higher-education sector, especially among for-profit schools. For example, DeVos stripped the department’s Investigations Group of its express authority to use risk-based modeling to target oversight inquiries. That common-sense approach to determine how to allocate limited enforcement resources must be reinstituted. But the department must go further, deploying coordinated, cross-agency teams to pursue high-priority enforcement actions that bring together investigators, lawyers, and even outside agencies like the Federal Trade Commission, the Consumer Financial Protection Bureau, and the Securities and Exchange Commission when appropriate. This builds on a strategy used by the Obama Administration’s Labor Department in improving wage-and-hour investigations.

Likewise, the department should renew its focus on intermediaries like accreditors, auditors, third-party administrators, and even online program management corporations that may expose patterns of violations. The Federal Trade Commission has built an internal database allowing investigators to track intermediaries like payment processors across a series of investigations, allowing the agency to identify different scams pursued through a common processor. The Department of Education should follow this lead with respect to third-party service providers.

The department must work with, not against, state attorneys general who share a similar mission of protecting students. And the department must dust off its enforcement toolkit—using all powers at its disposal to hold institutions, owners, and corporate executives accountable. For example, although the Higher Education Act gives the Department of Education authority to bring actions against owners and executives, the department has rarely, if ever, exercised that authority meaningfully. Even the prospect of personal liability can spur decision-makers to avoid risks and act in a way that is more beneficial to students.

To be sure, many of these and other steps can be launched on day one, but they need to be part of a broader effort to build a culture of student protections. The Department of Education needs to see itself as the protector of students and borrowers, not just the entity that sends billions of dollars annually to institutions of higher education.

All of this is achievable with the right commitment. And because these efforts can be pursued without any new laws, the most important thing they need is real leadership at the top.

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Read more about Department of EducationHigher educationInequalityTrump Administration

Aaron Ament Ament is president and a cofounder of Student Defense. Previously, he served as Special Counsel for higher education issues and subsequently as Chief of Staff of the U.S. Department of Education’s Office of the General Counsel.

Dan Zibel is vice president, chief counsel, and a cofounder of Student Defense. Previously, he served as the Deputy Assistant General Counsel for Postsecondary Education at the U.S. Department of Education, where he oversaw the Office of the General Counsel’s legal advice and litigation on higher education matters.

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